Saudi Arabia’s Electricity Market

February 29, 2012

Jennifer Derstine and Kira West work in the Office of Energy and Environment within the Manufacturing and Services division of the International Trade Administration

Saudi Arabia’s electricity market is growing rapidly, and will provide significant opportunities U.S. exports. Rising incomes and a growing population are driving both increases in electricity consumption and investment in energy-efficient transmission and distribution infrastructure. Additionally, high levels of solar radiation make the Saudi market a potential area of growth for solar energy technology and services.

Other market drivers include the Saudi government’s goals of reducing reliance on fossil-fuel use for power generation, increasing reliability and efficiency of the electric grid, integrating solar energy generation, and achieving efficiency gains in residential, commercial, and industrial energy consumers. In April, Assistant Secretary Nicole Lamb-Hale will lead a Clean Energy and Energy Efficiency Trade Mission to Saudi Arabia to help U.S. exporters benefit from the opportunities in this growing market.

The Saudi Electricity Company (SEC), which is majority owned by the Saudi government, owns the transmission and distribution infrastructure and most generation capacity in Saudi Arabia. In 2007, SEC also opened the market to independent power producers (IPP), offering 20-year power purchase agreements for power generation projects. The Electricity and Co-Generation Regulatory Agency (ECRA), one of three government entities that oversees the electricity sector, has long-term plans to deregulate the electricity market, separating generation, transmission, and distribution networks and introducing private competition.

SEC’s transmission and distribution network has seen considerable investment over the last decade, with SEC expanding the network by more than 50 percent since 2000. SEC also invested in energy efficiency technology, deploying 12,000 electric meters equipped with automated reading and variable rate systems in 2010.

However, the Saudi electric grid suffers from above average transmission losses, so investment in transmission and distribution infrastructure and energy efficiency technologies will remain high. Investment in the distribution system in Saudi Arabia is predicted to reach $24 billion over the next decade, and SEC has plans to further expand the transmission network within the country and to create new interconnections between GCC states. U.S. exporters will see a wide range of opportunities in green building, smart grid, and energy efficiency technologies.

In order to support its goals of reducing oil and gas power generation, the Saudi government is also prioritizing solar energy deployment. Saudi Arabia has sufficient solar resources to meet a large portion of its growing electricity demand, and the Saudi government envisions both PV and CSP solar technologies will play a role in solar development. U.S. companies will find opportunities in this sector in consulting and engineering services for design, construction and management, as well as supplying solar technology and equipment.

More detailed information about the Saudi electricity market and opportunities for U.S. exporters is available in the Market Intelligence Brief.